Finally! Not-for-Profit Cash Flow Answers
By Jeff Skaggs, Audit Principal
The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) 2012-05, which addresses the cash flow statement treatment of proceeds from the sale of donated assets for not-for-profit (NFP) entities.
The ASU requires NFPs to classify cash receipts from the sale of donated assets as an operating activity if the assets were received without donor limitations on the use of the assets, the NFP did not impose any limitations on the sale of the assets, and the assets were nearly immediately converted to cash. If the donor restricted the use of the assets to a long-term purpose, then the cash flows should be reported as financing activities. Otherwise, the receipts from the sale of the donated assets should be classified as an investing activity.
This ASU is effective prospectively for fiscal years beginning after June 15, 2013 with early adoption being permitted as of the beginning of the fiscal year of adoption with certain limitations if the NFP’s financial statements have already been made available for issuance.
The FASB issued the ASU to eliminate the diversity in practice that has emerged related to the treatment of these cash flows.
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